Back-to-back ’istisna‘

Definition of "Back-to-back ’istisna‘"

A form of double ’istisna‘ contract, where a company approaches an Islamic financial institution to provide finance for constructing a facility like a power plant. The financial institution agrees to provide the constructed facility on the basis of ’istisna‘. It engages some engineering firm to construct the plant, again on the basis of ’istisna‘. The difference between the price that the financial institution would pay to the engineering firm and the price that it would receive from the original buyer company would be its profit (or loss).